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Lakshmi Mittal Takes the Pedal Off the Metal

Lakshmi Mittal, head of the world's largest steelmaker and one of the world's richest men, has a new mantra: Slow and steady wins the race.

'We will be much more selective,' says Mr. Mittal, CEO of ArcelorMittal, the world's biggest steelmaker.
Benjamin Thomas for The Wall Street Journal

This from a man who created a steel giant by collecting mills around the planet and putting them under one umbrella. ArcelorMittal, which didn't exist a decade ago, now accounts for 10% of global steel production.

That pedal-to-the-metal growth strategy worked until a year ago when the world's economy took a dive. The company, based in Luxembourg, posted three consecutive quarterly losses, the latest at $792 million, and some analysts expect it to post another loss in the current quarter.

Still Mr. Mittal says it would have been far worse if the steelmaker didn't shut mills, slash production about 35% and lay off thousands of workers.

From his Berkeley Square office in London, Mr. Mittal says that the worst is likely behind but that the growth trajectory the company had been on since the merger of Arcelor SA and Mittal Steel Co. in 2006 isn't going to return anytime soon. An edited transcript follows:

WSJ: What did you do right in the past year during the economic downturn?

Mr. Mittal: We reduced our fixed costs by $10 billion, which is about 30% to 35% of our total fixed costs, in a period of nine months.

The crisis was a shock to everyone. Everyone was hoping in one or two quarters everything would get better.

Immediately, ArcelorMittal took a lot of steps. We announced production cuts. We reduced our inventories. We reduced our costs.

Associated Press

In September, when we had our investor day, we had production cuts and we immediately shut down production in Europe and the U.S. We restricted receiving raw materials from all the vendors. We immediately started looking at the organization and technically laying off a lot of people in different units. There were shorter working hours.

WSJ: What would you do differently? What did you do wrong?

Mr. Mittal: After the merger, ArcelorMittal was focused on a growth strategy. We built a company, 420 million tons [of steel-production capacity] and we were hoping to build it 450 million tons in the following five years. We were focusing growth in emerging markets, Brazil, India, China. That was the right strategy but we should have slowed it down.

WSJ: What are you doing now in terms of managing ArcelorMittal going forward?

Mr. Mittal: We will work on our mining projects -- Liberia, Senegal -- and we will continue to expand in the mining sector. We halted some of these projects during the crisis period.

On the steel sector, we will start looking at Brazil and India and [Commonwealth of Independent States] countries.

We will be much more selective and now we have to take a slightly different view. So instead of finishing a project in 2011-2012, we will finish in 2014.

Demand has clearly gone down. We have seen a 35% drop in developed markets over 2008. We have seen a 10% drop in developing markets excluding China.

WSJ: Do you see upturn or downturn in the next few years and how are you navigating?

Mr. Mittal: Growth will be a slow, progressive recovery. Maybe by 2012, we could come back to the pre-crisis level.

Growth will only come from emerging markets. That is where we will focus.

We have to become more flexible to the changes in the economy.

The question that we will have to address is how to make the industry in the Europe and the U.S. competitive and whether they could survive in the next 30 years going forward. The answer lies in making Western plants more productive and reducing their costs.

Productivity in the emerging markets is also going up. If we look at some of the plants in China and some of the plants in India, they are catching up really fast in terms of productivity. We have to work with the unions to ensure that they understand what is competition and productivity in the emerging markets.

WSJ: How do you get that message across without alienating your Western work force?

Mr. Mittal: They should visit these facilities in growth markets and see how they are catching up. China is willing to embrace any technology available. We have to make them understand where the world is leading.

WSJ: What signs are you seeing now that point to the slow, progressive recovery?

Mr. Mittal: Steel production was cut by 35% to 50% world-wide, below actual demand for steel. Customers are now restocking. This is why ArcleorMittal has announced the start-up of its blast furnaces. Our customers are now demanding more steel.